Executive Summary

Q3 revenue was $1.42B (+36.6% y/y) with gross margin of 16.5% (down 80 bps y/y); adjusted EBITDA was $32M (2.3% margin) and adjusted EPS was $0.01, as rising purchased transportation costs squeezed contractual margins amid soft demand .
Results missed Wall Street on EPS and revenue and came in below EBITDA consensus: EPS $0.01 vs $0.038 estimate, revenue $1.421B vs $1.431B estimate, and EBITDA $28M vs $35M estimate; brokerage gross margin fell to 13.5% (low end of outlook) as buy rates rose without offsetting spot opportunities (Street data via S&P Global; see Estimates Context) .
Guidance for Q4: adjusted EBITDA $20–$30M; brokerage volume down low-single digits y/y and brokerage GM% 12%–13%, below typical seasonality, driven by sustained supply-driven tightness and weakening big-and-bulky Last Mile demand post-Labor Day .
Management initiated >$30M of incremental annualized cost actions (bringing cumulative expense reductions to >$155M) and highlighted AI-driven productivity (brokerage +19% LTM) and LTL outperformance (+43% volume) as long-term earnings drivers .

What Went Well and What Went Wrong

What Went Well

LTL strength and volume outperformance: Brokerage volume +1% y/y, with LTL +43% y/y (31% of brokerage volume); truckload revenue per load up 1% y/y despite demand softness .
Productivity and cash conversion: Brokerage productivity +19% over the last 12 months; adjusted free cash flow conversion of 56% (Q3), with cash balance up sequentially to $25M and total committed liquidity of $590M .
Technology/AI execution: Launched next-gen pricing on combined dataset; agentic AI for carrier inquiries; AI image QA in Last Mile; management emphasized AI as an operating margin lever .

What Went Wrong

Margin squeeze from supply-driven tightness: Contractual book (≈70% TL) saw gross profit per load pressure as buy rates rose without sale-rate or spot offsets; brokerage GM% fell to 13.5% and October’s TL GP/load was ~25% below its 5-year average (ex-COVID) .
Demand weakening and Last Mile deceleration: Big-and-bulky Last Mile demand weakened since Labor Day, reversing typical Q4 seasonality; complementary services GM% was 21.3% (stable but below truck brokerage pressure) .
Automotive headwinds and Q3 miss vs prior outlook: Automotive was a ~$5M y/y margin headwind; adjusted EBITDA of $32M landed “slightly below our outlook” and below Q2’s Q3 guide ($33–$43M) .

Financial Results

Headline metrics (y/y and sequential)

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($MM)	$1,040	$1,419	$1,421
Gross Margin %	17.3%	17.8%	16.5%
Adjusted EBITDA ($MM)	$33	$38	$32
Adjusted EBITDA Margin %	3.2%	2.7%	2.3%
GAAP Net Loss ($MM)	$(243)	$(9)	$(14)
GAAP Diluted EPS ($)	$(1.81)	$(0.05)	$(0.08)
Adjusted Diluted EPS ($)	$0.05	$0.04	$0.01

Actuals vs S&P Global Consensus (Q3 2025)

Metric	Street Consensus	Actual	Surprise
Revenue ($MM)	$1,430.6*	$1,421	−$9.6 (−0.7%)*
EPS (Primary) ($)	$0.0379*	$0.01	−$0.0279 (MISS)*
EBITDA ($MM)	$35.3*	$28.0*	−$7.3 (MISS)*

Values with asterisks (*) retrieved from S&P Global.

Segment breakdown

Segment ($MM)	Q3 2024 Revenue	Q3 2025 Revenue	Gross Margin % (Q3 2025)
Truck Brokerage	$655	$1,039	13.5%
Complementary Services (Last Mile + Managed Trans.)	$419	$442	21.3%
Eliminations	$(34)	$(60)	—
Total	$1,040	$1,421	16.5% (company)

KPIs and operating metrics

KPI	Q3 2025	Context
Brokerage volume y/y	+1%	Outpaced market; LTL strength
LTL volume y/y	+43%	31% of brokerage volume
TL volume y/y	−11%	Contract ~71%, Spot ~29%
Brokerage GM%	13.5%	Low end of outlook
Complementary services GM%	21.3%	Stable
TL revenue per load y/y	+1%	Soft demand limited upside
Last Mile stops y/y	+12%	Post-Labor Day demand weakened
Brokerage productivity (LTM)	+19%	Tech/AI-enabled
Adj. FCF ($MM)	$18	56% conversion; cash up seq.
Liquidity (Committed / Available) ($MM)	$590 / $383	Cash $25; Net debt $395
LTM Bank-Adj. Leverage (Gross/Net)	2.4x / 2.3x	Covenant headroom (4.5x)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA ($MM)	Q3 2025	$33–$43 (guided on 8/7)	$32 actual	Below prior guide
Adjusted EBITDA ($MM)	Q4 2025	N/A	$20–$30	New
Brokerage volume y/y	Q4 2025	N/A	Down low-single-digit %	New
Brokerage GM%	Q4 2025	N/A	12%–13%	New
CapEx ($MM)	FY 2025	$65–$75 (as of Q2)	Tracking low end	Lower end reaffirmed
Q4 modeling: D&A ($MM)	Q4 2025	N/A	Dep ~20; Amort ~10	New
Q4 modeling: SBC ($MM)	Q4 2025	N/A	~$7	New
Q4 modeling: Restructuring/Integration ($MM)	Q4 2025	N/A	~$15	New
Q4 modeling: Net interest ($MM)	Q4 2025	N/A	~$9	New
Q4 modeling: Tax rate / FD shares	Q4 2025	N/A	~30% / ~170M	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2025)	Trend
AI/Technology	Unified platform; early PT benefits; heavy AI/ML investment	Next-gen pricing on combined data; agentic AI; AI image QA in Last Mile; margin lever	Improving
Supply/tightness & regulatory enforcement	Supply-driven tightening emerging; tender rejections/load-to-truck up in Q2	Tightness intensified in Sept/Oct; enforcement on non-domiciled CDLs/English proficiency driving capacity exits	Worsening supply (tighter)
Demand	Uncertain/soft; April TL down; muted seasonality	Weakened through Q3; muted peak; pressure in big-and-bulky Last Mile	Worsening
LTL performance	LTL +45% y/y in Q2; +26% in Q1; stable GP/load	LTL +43% y/y; GP/load improved sequentially	Strong/outperform
Automotive	Significant headwind ($10M GP in Q1)	Continued headwind (~$5M margin impact in Q3)	Persistent headwind
Last Mile	+20% stops (Q1); +17% (Q2)	+12% stops but demand weakened post-Labor Day	Decelerating
CapEx & leverage	FY25 CapEx $65–$75; 2026 $45–$55; net leverage ~2.1x	Q4 CapEx ~$20; tracking low end FY; net leverage 2.3x with ample covenant headroom	Lower CapEx; leverage stable

Management Commentary

“Market conditions tightened late in the third quarter as truckload capacity exits accelerated… Both dynamics have continued into the fourth quarter.” – CEO Drew Wilkerson .
“We’re hitting an inflection point with our AI investments… it will actually mean [higher] operating margin” – CEO on AI differentiation .
“Our results were slightly below our outlook… [contract] margin squeezed in September… Automotive was a continued headwind (~$5M y/y margin impact)” – CFO Jamie Harris .
“Buy rates moved higher in September and even more in October despite weaker demand… two-thirds of our freight came from outbound states with buy rate increases” – CSO Jared Weisfeld .
“We’re taking additional actions… more than $30M of incremental annualized savings… total reduction >$155M” – CFO .
“Every penny of buy rate increase is ~$2.5M of quarterly EBITDA headwind for us” – CEO, sensitivity .

Q&A Highlights

Regulatory enforcement and capacity exits: Management views enforcement as a major structural change (bigger than ELDs), likely reducing industry capacity and setting up a sharper inflection when demand returns .
Coyote acquisition and pricing: CEO acknowledged a 2025 pricing decision mistake that hurt volumes; on people/customers/tech, integration has progressed well; expect long-term benefits .
Leverage and covenants: Net leverage 2.3x; Q4 midpoint would be ~2.8x vs 4.5x covenant—ample headroom .
AI differentiation: Emphasis on tangible operational results over PR; inflection point across pricing, carrier communication, and Last Mile QA—expected to support margins .
Last Mile and demand: Big-and-bulky demand weakening since Labor Day; Q4 Last Mile expected down sequentially vs typical seasonality .
Margin sensitivity: Industry spot linehaul up ~6c/mile over two months; RXO’s buy rate increase less than industry; each 1c/mile ≈ $2.5M EBITDA headwind per quarter .

Estimates Context

Q3 2025 vs S&P Global consensus: EPS $0.01 vs $0.0379 estimate (MISS); revenue $1,421M vs $1,430.6M estimate (MISS); EBITDA $28M vs $35.3M estimate (MISS). Values retrieved from S&P Global.*
Street estimates likely need to reflect: (1) Q4 EBITDA guide of $20–$30M below typical seasonal uplift; (2) brokerage GM% guide of 12%–13% amid sustained supply-driven tightness; and (3) Last Mile sequential decline due to big-and-bulky softness .

*Values retrieved from S&P Global.

Key Takeaways for Investors

Near-term squeeze persists: Supply-driven buy-rate inflation without spot offsets is pressuring contractual margins; Q4 guide embeds continued tightness and weaker Last Mile, implying downside to seasonal norms .
Structural setup: If enforcement persists, capacity exits could elevate cycle earnings power for scaled brokers; watch tender rejections approaching 10% for spot-led price relief .
Cost actions and AI are offsets: >$30M new savings (>$155M cumulative) and AI-driven productivity (+19% LTM) help defend margins and set up operating leverage into a recovery .
Mix matters: LTL outperformance (+43% volume) provides stability, but TL remains the profit swing factor; automotive remains a headwind .
Liquidity intact: $590M committed liquidity ($383M available) and net leverage 2.3x provide cushion to navigate the squeeze and invest in tech .
Watch list for Q4 print: Brokerage GM% trajectory vs 12%–13% guide, any easing in buy rates, Last Mile trends into holiday, and early evidence of spot opportunities returning .
Medium-term catalyst path: Demand normalization (housing sensitivity, rate tailwinds), sustained enforcement, and full synergy capture (buy-rate favorability toward 100 bps) could drive sharper margin inflection .

Appendix: Additional Disclosures and Press Releases

Q3 2025 earnings press release and reconciliations (Form 8-K EX-99.1) provide detailed P&L, segment disaggregation, and non-GAAP bridges .
Q3 2025 investor presentation outlines Q4 outlook, technology initiatives, cost actions, leverage, and liquidity .
External legal update: Johnson Fistel announced an investigation relating to RXO on Oct 28, 2025 (third-party law firm notice) (no company response disclosed).

Notes: All figures are from company filings and transcripts unless marked with an asterisk, which denotes S&P Global consensus/actuals. Non-GAAP measures are as defined and reconciled in the company’s materials .

RXO, Inc. (RXO)·Q3 2025 Earnings Summary